There are skills like Poetry (haiku), Go, Hawking, Tea Ceremony and similar. Flower Arrangement (Ikebana) is mentioned on p 17 as one of "many other Fine Arts which we have been unable to discuss in this chapter due to space limitations" but which "Gamesmasters who wish to broaden their campaign's cultural horizons may include . . . at their discretion."
In my re-reading I haven't yet got to the rules that explain what actually follows, in play, from these skills, beyond (i) studying them can raise mental stats, and (ii) successfully performing the Tea Ceremony can raise effective Status in the context of an influence attempt.
Well, I've just got to the section of the rules on Experience. To get to level 2 requires 10 Budo and 10 On. Defeating a 1st level warrior is worth 1 or 2 Budo (depending on whether s/he is "Rabble" or "Classic"); an Extra (a "minion" in 4e D&D terms) is worth 0.5 Budo. So that seems like quite a few risky combats to get to 2nd level! And that's before we get to the On requirements, which are comparably onerous. (If you'll forgive the transliterational pun.)
It's 50 for 3rd, 100 for 4th, 500 for 5th and 1,000 for 6th!
Allowing for the Avalon Hill-wargame style of rules presentation, it's actually quite evocative - reading the rules is generating mental images of these intriguing characters whose abilities (expressed in detailed RPG mathematics) and whose social context are both known in loving detail. (This is a contrast with eg Agon which I played for the first time on the weekend, and which by way of contrast paints in very broad brushstrokes both mechanically and in respect of setting details.)
But I worry about the play - everything that you say seems consistent with what I would expect these sorts of rules to lead to. If I wanted to run this sort of game these days I'd use Burning Wheel, perhaps through the lens of The Blossoms are Falling.
Right, there are dozens of little counters and whatnot to keep track of, lots of book keeping is what I remember. Actually advancing in level was just not a thing, basically. Though I think the power curve is VERY steep! A 3rd level Samurai would, for example, basically kill the whole party before any of them moved at all if the PCs were level 1. That might require some bad luck or not having certain skills though, it is hard to remember all the details.
I do remember the game being quite evocative, though my later readings and whatnot put me in some question as to the handling of priests and such. Then again, I'm no expert on Japanese Culture, so I don't have a strong opinion. Bushido's interpretation of Buddhism for instance, is pretty 'out there' by comparison to the 'Pure Lands' and 'Chan' schools I'm familiar with, or their Tibetan equivalents (granting that some of it is pretty 'mystical'). Spell casting, if you want to call it that, certainly isn't anything like the dominant force that it is in D&D anyway.
But yeah, the fundamental truth is it is still a traditional 'DM sets everything up and tells the story' sort of game design (I mean it was written in about 1976, hardly a surprise). Like 2e it is kind of expecting to tell what is presumably a very dramatically focused and fairly complex story containing a mix of intrigue, magic, mystery, combat, etc. My recollection is that PCs are pretty much powerless pawn level guys in that setting. While higher level NPC warriors are not common at all, there are lords and organizations all over the place who can command plenty of forces and you really cannot fight them. You get told to do X, Y, or Z, it isn't generally up to you. Setting tourism seemed to be the most likely result, and largely what I remember. I mean, maybe not entirely unrealistic. I wouldn't expect some low level guys in Muromachi Kyoto to be all that much up to their own business, but a more story focused system might, for example, give you the ability to establish rivalries, love interests, a nemesis perhaps, etc.
It isn't a bad game, for what it is, and kind of the template on which later Japan/East Asian games and supplements were either based, or were pushing against. However, like Aftermath, I think it tends to be too wedded to being 'realistic' and far more detailed in little ways than what would really make the best game play for most people. I just remember Aftermath being basically a gun nut paradise sort of thing, where you could carry around 3 pistols and a dozen kinds of ammo and they would each do distinctly different things, but it could take 20 minutes to figure out what happened if you shot someone, and usually combat lasted about 2 seconds of game time. lol.